Where US spending cuts will hurt most

At least 37 federal programs will lose $500 million or more. If enacted all at once, 9 years of reductions would lower the current debt by just 7.5%.

By MSNMoney partner Sep 17, 2012 2:48PM
US News logoBy Rick Newman

There's a paradox about government spending. A lot of taxpayers think there's too much of it, but when it comes to cutting specific programs, they want to leave everything the way it is. It turns out that we like what our government buys more than we realize.

The big spending cuts due to kick in at the start of 2013 present the same conundrum. Under the Budget Control Act signed into law in summer 2011, Congress is supposed to start cutting about $110 billion per year in spending, with half coming from defense and half coming from other programs.

It sounds reasonable. The cuts represent less than 3 percent of all government spending, and we have to start somewhere if we're going to begin paying down a national debt that now tops $16 trillion.

But once the ax hits specific programs, the cuts seem scarier. The Obama administration, no doubt, was well aware of that when it drafted a recent report detailing where, exactly, that $110 billion is going to come from every year. The Budget Control Act stipulated that some programs would be exempt from cuts, including Social Security, Medicaid, food stamps, veterans' benefits, and a few other things. Taking those off the table means the remaining programs will need to be cut by proportions generally ranging from 7.6 percent to 9.4 percent.

Cuts of that magnitude would be painful. In its report, the White House argued that such cuts "would be deeply destructive to national security, domestic investments, and core government functions." Instead of immediate, across-the-board spending cuts, President Obama would prefer to address the problem with a mix of smaller spending cuts, higher taxes on the wealthy, and other reforms that include a higher eligibility age for Medicare and Social Security.

The scheduled cuts are now law, and they'll go into effect unless Congress changes the law. I scoured the White House report to get a feel for where the money will come from: At least 37 federal programs will lose $500 million or more, which will account for about $81 billion of cuts. The remaining $29 billion will come from an array of smaller programs.

Here's where some of the biggest cuts will occur:
  • Operations and maintenance for the Army, Navy, Air Force, Marines and National Guard: $20.4 billion in cuts
  • Military procurement: $11.5 billion
  • Medicare: $10.6 billion. (The new law limits cuts in Medicare to 2 percent of total spending.)
  • Military research: $6.5 billion
  • Defense health programs: $3.3 billion
  • National Institutes of Health: $2.5 billion
  • Special ed and education funding for the disadvantaged: $2.3 billion
  • Rent subsidies for low-income tenants: $1.5 billion
  • Afghan security forces funding: $1.4 billion
  • Federal unemployment insurance: $1.4 billion
  • Diplomatic and consular funding: $1.1 billion
  • NASA: $1.1 billion
These are just the cuts that will exceed $1 billion per year or so. Many smaller programs could suffer more, since they have less money to work with overall. And remember, these cuts are scheduled to be enacted every year through 2021.

Though the numbers may sound large, the economy can probably handle such cuts. There might be layoffs at defense contractors and some government agencies, along with lower spending by people getting smaller government subsidies. Still, the cuts represent less than 1 percent of the nation's total economic output. On their own, the scheduled cuts would slow the economy but probably not induce a recession.

The problem is that they wouldn't cut the national debt by all that much either. The Budget Control Act cuts amount to just $1.2 trillion over nine years (the numbers don't add up precisely because part of the savings includes interest expenses that won't have to be paid). If enacted all at once, those nine years of cuts would lower today's debt by just 7.5 percent. For all the pain that scheduled cuts would cause, a lot more is coming.

More from US News & World Report

49Comments
Sep 18, 2012 12:41PM
avatar

Food Stamps

            Food Stamps are one of the most abused and wasteful social program this country has ever developed. A family of four receives more money monthly then my family of five spends a month on food. The amount paid out each month should be cut by at least one third. Here is why those on food stamps would not go hungry or malnourished because of this change. Purchases by food stamps should be restricted to the following: Fresh/frozen non prepared meats, fresh/frozen non prepared vegetables, deli meats/cheeses, canned goods, breads, non sweetened dairy, and juices. The following would be banned from being purchased by food stamps: Soda, bottled water, power and energy drinks, coffee, tea, ice cream, candy, any pre-prepared meals or sandwiches, snacks/junk food, pet food, cigarettes and alcohol.

Sep 18, 2012 12:39PM
avatar

Social Security/Medicare

            If you have paid into Social Security, you are entitled to payment when you retire. You are not entitled to a raise every year. That is not how pensions or insurance works. Social Security is meant to keep you out of poverty, not pay for every convenience life has to offer. If you paid into Medicare, you are entitled to help with some health care costs. You are not entitled to 100% paid coverage for every little pill and device on the market. Medicare is meant to keep you healthy and preserve your life. It is not meant to make you 100% comfortable. That is why you are to save your own money.

 

Welfare

            You are not entitled to welfare; you are not entitled to Medicaid. You are not entitled to free legal care or an education. Anything you get is a gift to you from those who pay your way and you should get down on your knees and be thankful. No one is entitled to something they did not earn. Put you hand to better use. Welfare is to be a hand up, not a hand out. It is not meant to be forever, it is not meant to be a way of life. It is not a gift for or to your next generation.

Sep 18, 2012 12:31PM
avatar
It's a shame Congress didn't take action sooner on our budget woes and runaway spending. Everything needs to be on the table: the tax code is too complicated and riddled with loopholes and goodies for too many special interest groups. And gov't spending is out of control - stop wars, cut military spending, cut beauracracies and wasteful programs. It's possible if politicians have the balls to give up some of their pork and aren't afraid to piss off the gov't employee union.
Sep 18, 2012 12:53PM
avatar

Our Congress had every chance to avoid this outcome. It is time to bring government spending under control. Whatever must be cut acheive even a small reduction in the deficit, must be cut. Spending by the Federal government and most other governments in this country is unsustainable.

There is not one incumbent in Congress that has earned your vote this year. We have seen their performance and priorities the past two years and it is time we the voters, send them on to their next career. I'm only sorry welfare was excluded from the axe. Here in Pennsylvania, each receipient get 188 dollars per week, per child. No wonder they have no incentive to use BC.  

Sep 18, 2012 1:53PM
avatar
Theres too many people in NC sucking up stamps, welfare, disability, just for being FAT.Yet my daughter works fulltime, for a measly **** 300.00 a week. She was told that she makes too much money. Too much for who?The ileagal ALIEN that got her knocked up doesnt help out with a dime.The worst part of it is, this family I know get 2000.00 SS per month for being FAT, AND, 670.00 per mnth in stamps. for a fat family of four.They are UNGRATEFULL because theyre always complaing, that theyre not GIVEN enough! 
Sep 18, 2012 1:53PM
avatar

Keep it simple, make straight across the board cuts in all government agencies. TFB if your favorite program takes a hit, let everyone take the hit. Isn't that what being "fair" is all about?

Sep 18, 2012 1:21PM
avatar

What I would do

            No government sponsored aid to foreign countries.

            No prohibiting individual aid to a foreign country unless the country is an enemy.

            No tax on wages. No tax on investments. Tax on sales only.

            No aid to anyone who is not a citizen.

            To be a citizen in full standing you must be born of two citizens or be born of one citizen on United States land. Being born of one citizen in a foreign country or being born in this country of two non citizens would give you the right of dual citizenship on your 18th birthday; you would not be entitled to any benefits you had not earned.

            No elected or hired employee of the government would be exempt from any law.

            No government employee would be allowed to belong to a union.

            All embassies in hostile countries to have marine security.

Sep 18, 2012 2:03PM
avatar
They can start by ending and banning PORK BARREL NONESENSE.
Sep 18, 2012 1:51PM
avatar
Oh, yeah, you can add 'students' into the entitlement-minded parasites who think other people should pay for their "higher' education.  College is a privilege, not a right, so pay for it yourself.
Sep 18, 2012 2:30PM
avatar
SSI is supposed to be a supplementary income for disabled persons who can't work and have less than 40 working quarters (10 years) which makes them ineligible for SSD. So why are all these people getting SSI for young children who are in school. 
Sep 18, 2012 2:15PM
Sep 18, 2012 1:46PM
avatar
Im still waiting to see the filthy, dirty, rich, get their **** taxed. I dont think taxing the rich will help out the debt. but will make most us that are taxed extremely high in lower income earners, feel alot better. After all the rich get tons of perks just because theyve got the most moolah! Hell Im from middle class, got taxed 20% for the few bucks my father left me. So, Ill be RETHINKING how I leave anything to my  kids.
Sep 20, 2012 8:35AM
avatar
We need to relook the concept of the Earned Income Tax credit. The EIC should be capped at no more than the total amount of tax withheld.  Last year when I did my two daughter's taxes one had $1,800 withheld but received a $5,600 refund, the other had $2,200 withheld and received $3,800 refund. Sure looked like a freebie to me.  Subsidies need to come with strings and rules.  Cap the EIC and relieve the pressure on well run and governed subsidy programs.
Sep 18, 2012 2:00PM
avatar
Folks would do well to have a forty hour work week and get paid 20.00 bucks an hour. I cant live on 7.00 hourly with a whole 10 hours a week. **** here in NC one 40 hour job is busted up among 4 sheeples!How can one go on with out  pay raises? Dems want stamps, reps wont let us have decent wages, yet were on our own.
Sep 17, 2012 11:00PM
avatar
Hey, no worries. Romney has it all figured out.
He's going to increase defense spending, lower taxes, and cut government funding for students, the lower middle class, the elderly, and the poor.... and don't forget those new FREE-TRADE MARKETS he's proposing, because the job creators love when the little people buy cheap sh#t from places that pay slave wages and have little to no industry regulation - places like China.

Who would have ever thought that the Republican candidate would love Communist countries so much more than America.

Sep 18, 2012 1:54PM
avatar
Watch! ACORN will probably get a load of cashed dumped their lap.
Sep 18, 2012 1:48PM
avatar
Cutting spending never hurt anyone.  We have far too many 'adult parasite losers', deadbeats, bums and fat welfare mom's who think they are entitled to other people's hard-earned money.

Well, guess what?  Think again?  It's time to get off your lazy, fat, f*****g asses and get a job.  You want something to eat?  Get a job!  You want a car?  Get a job!  You want a house?  Get a job!  You want the new iPhone?  Get a f*****g job!!!  I don't care if it's flipping f*****g hamburgers or being a garbage man - GET A F*****G JOB!!!

Oh?  There aren't any jobs?  Then vote for Romney/Ryan!  Elections have consequences and "Dumbo" and his idiot sidekick, "Plugs", are NOT the answer.
Sep 21, 2012 2:33PM
avatar

I have made my living in agriculture all my life. There is absolutely no need for price supports, government loan programs, subsides, etc. they should have been gutted in 1945. We do not need house and senate agriculture committees, a United State department of agriculture. Give agriculture a fresh fruit and vegetables commodities market. Put agriculture on the world wide free market. Agriculture will produce what we want to consume, not what government subsidizes. Government is the greatest  contributor of obesity, it subsidizes fats and oils, sugar, corn sugar and the like. Productivity will increase in agriculture by 20% a year as poor management is forced to leave agriculture and resources are redistributed among growers who produce what the consumer want.

Sep 18, 2012 1:36PM
avatar
Phew, glad Planned Parenhood, NPR/PBS were not listed . . .
Sep 22, 2012 4:18PM
avatar

There in lies the problem Mr. Rick Newman - you don't view a 7.5% decrease as substantial.  We need to make the cuts, and we need to do it in increments. It would be moronic to think we were going to balance the budget next year - we could't possibly tax enough, nor would it be wise to cut that much. You yourself say in the article the economy could sustain it - sounds to me like a good balance then - sustainable cuts that MUST BE DONE, we can't go on borrowed money forever. We need to initiate cuts, and as the economy adjusts, more cuts, slow and incrementally until we get our financial house in order.

Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

VIDEO ON MSN MONEY

RECENT QUOTES

WATCHLIST

Symbol
Last
Change
Shares
Quotes delayed at least 15 min
Sponsored by:

MARKET UPDATE

NAMELASTCHANGE% CHANGE
There’s a problem getting this information right now. Please try again later.
NAMELASTCHANGE% CHANGE
There’s a problem getting this information right now. Please try again later.
Market index data delayed by 15 minutes

[BRIEFING.COM] The stock market finished the Wednesday session on a modestly lower note, but it is worth mentioning today's retreat took place after six consecutive gains. The Dow Jones Industrial Average (-0.1%) and S&P 500 (-0.2%) settled not far below their flat lines, while the Nasdaq Composite (-0.8%) lagged throughout the session.

Equity indices started the day in the red, with the Nasdaq showing early weakness as large cap tech names and biotechnology weighed. The technology ... More


Currencies

NAMELASTCHANGE% CHANGE
There’s a problem getting this information right now. Please try again later.